Return to surplus could be left in limbo

A hung parliament could jeopardise pledges from both sides to bring the federal budget back into surplus by 2012-13.

A minority government may be forced into accepting some of the pet projects of the independents and Greens holding the balance of power in both the House of Representatives and the Senate in order to win their support.

“The increased power of the independents and Greens suggest a much more difficult policy environment, with the risk of fiscal slippage in an attempt to appease minority interests," said RBC Capital Markets senior economist Su-Lin Ong.

Labor and the Coalition are committed to returning the budget to the black by 2012-13. Treasurer Wayne Swan is projecting a surplus that year of $3.8 billion and his opposition counterpart, Joe Hockey, is estimating $6.2 billion.

Lower house independents Bob Katter, Tony Windsor and Rob Oakeshott are former members of the Nationals and are keen to see improvements in service provision in rural communities.

All have expressed support for high-speed broadband in the bush, and Mr Katter and Mr Windsor have called for greater rural access to dental care.

Mr Windsor has been derisive of the Coalition’s broadband plans, which are estimated to cost $6.3 billion over seven years. That could mean any deal for his support for a Coalition minority government would include something more akin to Labor’s national broadband network, which comes with a $43 billion price tag.

Mr Katter has said he is strongly opposed to a privatised NBN, citing what he described as the disasters that resulted from the privatisation of Telstra. He wants more support for ethanol.

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Improved dental care would also be costly to fund: a proposal by the Greens for it to be covered by Medicare is estimated to cost about $4.3 billion a year.

Labor could find a hole in its budget projections if it is forced to compromise on its mining tax plan to gain support from the three former Nationals MPs, or Greens MP Adam Bandt and Tasmanian independent Andrew Wilkie.

A Labor or a Coalition minority government will also be forced to deal in the Senate with the Greens.

AMP chief economist Shane Oliver said the Greens “tend to have a negative view of economic rationalism and are probably less worried about the budget deficit or budget surplus than Labor and the Coalition profess to be".